Selecting a Lender
Which lender should you use to get a reverse mortgage? It may depend on the type of loan you want.
Public sector reverse mortgages aren't available in most areas. And when they are, usually only one government agency offers any specific type of loan. Normally, you can't have more than one type of public sector reverse mortgage on your home. So you would be selecting a loan type - for example, a property tax deferral loan, or a deferred payment home repair loan - rather than a lender.
In the private sector, the federally-insured Home Equity Conversion Mortgage (HECM) is by far the most frequently selected reverse mortgage. That is why lenders offering proprietary private sector plans also offer HECMs. So this article focuses on selecting a HECM lender. But it also tells you which of them can give you the side-by-side comparisons of HECM versus proprietary loans that meet AARP's model specifications.
What lender should you use to get a federally-insured Home Equity Conversion Mortgage (HECM)? AARP advises that you consider cost, origination services, loan servicing, and a lender's professional commitment to meeting your needs.
Cost
Generally the only HECM loan costs that lenders control are the origination fee and the servicing fee. Ask the dollar amount that each lender would charge you for these fees. Although third-party closing costs don't change much from lender to lender, you might want to check these, too.
Unlike traditional mortgages, HECM interest rates currently (December, 2006) do not vary from one lender to another. The rates can change each week, but during any given week, every HECM lender charges the same rates. But this may begin to change somewhat during 2007, as some lenders may offer new choices on HECM loan costs.
Origination Services
The level of service a lender provides is more difficult to judge than cost is, but service is just as important. You want your loan officer to be knowledgeable, experienced, and respectful.
After reading all of AARP's web site information on reverse mortgages, you will be better able to judge how well a lender knows reverse mortgages. How long a lender has been offering reverse mortgages and in how many places may be particularly important if your loan runs into any unexpected snags. An experienced lender has already encountered most of the issues that can cause problems, and is most likely to have a good working relationship with the nearest HUD office.
You also want a loan officer who respects your knowledge and preferences and helps you reach your own decisions. You don't want to feel pressured by a loan officer, And you don't want a loan officer who is clearly more concerned about selling you a loan than meeting your needs.
Loan Servicing
At loan closing, most originating lenders transfer their loans to another office or company that specializes in servicing the loan. Ask each lender, "Who will service my loan after it closes?" and request a sample of the account statements the servicer would send you.
Make certain you fully understand all the information on these statements. In particular, if you are considering a HECM creditline, find out how the servicer would keep you informed about the growing amount of cash that a HECM creditline provides.
Professional Commitment
A commitment to meeting consumer needs can be seen in a lender's professional relationships and consumer information. For example, members of the National Reverse Mortgage Lenders Association (NRMLA) have developed "best practices" for their industry. If you don't want to be contacted by a NRMLA lender, however, be sure to state that preference if you request any NRMLA publications.
Lenders committed to the highest standard of consumer information can provide loan analyses and comparisons that meet AARP's model specifications. The only computer software currently meeting this standard is being used by the loan officers and correspondents of Financial Freedom Senior Funding Corporation, and the loan officers of Wells Fargo Home Mortgage. The printout with the key side-by-side comparisons is called the "Reverse Mortgage Performance" report in the Financial Freedom software, and the "Reverse Mortgage Comparisons" report in the Wells Fargo software. Be sure to ask for these specific printouts, especially if you are considering a proprietary loan.
AARP Resources
AARP's Model Specifications for Analyzing and Comparing
Reverse Mortgages
URL:
http://assets.aarp.org/www.aarp.org_/
articles/revmort/AARPmodelspecifications.pdf (Adobe Acrobat
required.)
The purpose of AARP's model specifications, the process by
which they were developed, and technical details needed to
implement them.
Additional Resources
HECM
Lenders
URL: http://www.hud.gov/ll/code/llplcrit.html
HUD offers the most complete list of Home Equity Conversion
Mortgage lenders. Once at the site, select your state, check the
HECM box, and click on the SUBMIT button. Be sure to click on
"Click Here for next 10 Records"
so you see all the lenders for your state.
National Reverse
Mortgage Lenders Association (NRMLA)
URL: http://www.reversemortgage.org/
These lenders are members of NRMLA and have signed its code of
conduct.
AARP does not endorse any reverse mortgage lender or product.
